Westpac note that “the Aussie’s traditional sensitivity to risk appetite has largely been relegated to intra-day movements since Russia’s invasion of Ukraine. A$ remains the strongest currency in the G10 since the invasion, followed by fellow commodity-linked currencies. Clearly the extraordinary surge in energy and metals prices strengthens Australia’s already large trade surpluses. Still, the RBA’s slow shuffle towards finally commencing tightening contrasts with an FOMC openly considering 50bp hikes. Moreover, CFTC positioning data shows many A$ shorts have now been unwound. This should help cap AUD/USD in the $0.7650/0.7700 area near term, though we expect dips to be modest multi-month.”
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